Sterling finds itself in an unusual situation this week—it’s completely devoid of notable events. There’s no first-stage data from the UK, nor any significant announcements from the Bank of England (BoE). Consequently, the GBP/USD pair currently offers a clear insight into the US dollar’s movements among the major currency pairs. This means that whatever influences the dollar on Friday, the pound will simply mirror that. On Monday, this translated into a rather stagnant trading environment around the 1.3450 mark, with the pair hovering just above the daily 50-period exponential moving average (EMA).
A calm personality
Now, there’s a tendency to equate calmness with stability, but this is more about a lack of triggers than anything else. For weeks, GBP/USD has been trapped in a range between 1.3400 and 1.3500, and Monday didn’t change that dynamic. Any dip towards 1.3400 was met with buying interest, but the subsequent rise to 1.3450 seems to have hit a wall. Moreover, the daily Stochastic Relative Strength Index (Stoch RSI) is lingering in the lower half of its range, providing no signals of being oversold. With the 50 EMA positioned near 1.3450 and the 200 EMA around 1.3400, the pound is essentially in limbo, waiting for some data to shake things up.
US Labor Week becomes a hot topic
Given the lack of domestic catalysts, any significant movement in Sterling this week will likely stem from developments in the other currency in the pair. The Federal Reserve is largely anticipated to maintain interest rates between 3.50% and 3.75% at its upcoming meeting, with market speculations of a potential rate cut currently around one-third. However, that sentiment seems to be shifting again, particularly as U.S. labor data appears to cool off. This makes the upcoming series of employment reports, especially the ones due on Friday, crucial for GBP/USD’s trajectory.
levels and bias
The 1.3400 threshold is vital support, especially since the 200 EMA is hovering just above it. If the daily close dips below this point, expect the range to shift further downward towards 1.3350. On the upside, 1.3450 and the 50 EMA stand as immediate pivot points, while 1.3500 acts as a resistance level that limits further gains. Until we see some stabilization in U.S. salary data, a neutral stance seems most honest. It may be best to trade within a range, suppressing extreme price movements and keeping position sizes modest until Friday.
American Worker’s Gauntlet
This week kicks off with the Job Openings and Turnover Survey (JOLTS) on Tuesday, followed by the Automatic Data Processing (ADP) Employment Report and the Institute for Supply Management (ISM) Services Survey on Wednesday. Finally, the Non-Farm Payrolls (NFP) will be released at 12:30 p.m. Japan time on Friday. The consensus suggests that the unemployment rate may remain steady at around 4.3%, average hourly wages could dip to 3.4% year-on-year, and the economy might create around 85,000 new jobs—down from 115,000 previously. If the numbers fall short, it could reignite discussions around Fed rate cuts, nudging GBP/USD closer to 1.3500, whereas robust figures could challenge the 1.3400 mark. It’s straightforward since there’s not much coming from the UK side of things.
